Blogger Wins Fair Use Defense…On a Motion to Dismiss!–Righthaven v. Realty One

I’ve mentioned Righthaven before in my quick links, but this is my first full blog post about them. I trust most of you are familiar with Righthaven by now. Righthaven is a serial copyright plaintiff that searches for republications of newspaper articles, acquires the copyrights from participating newspapers (the Las Vegas Review-Journal is the largest and highest profile participating paper), sues the republisher for copyright infringement without any prior notice–seeking $75k or $150k in damages and transfer of the infringer’s domain name–and then sends a settlement offer to the surprised defendant. According to this website, Righthaven has brought 157 lawsuits and settled 56 of them.

Righthaven is controversial for many reasons, including:

* Righthaven does not give defendants any warning before suing them, even though many of the defendants would happily remove the article if asked. Righthaven argues that it’s too costly for newspapers to constantly chase down Internet republications. Plus, Righthaven thinks a litigation crusade will generate an in terroram effect to dissuade others from making unauthorized republications in the first place. A similar in terroram campaign has had, at best, mixed results for the record labels, so it’s not clear how well that’s going to work for newspapers.

* Many of the defendants linked to the original newspaper article as part of their posts. These links don’t directly cure any infringement, but they do represent a way of transferring value to the newspapers. First, the links may prompt readers to investigate the original source–even when the post contains the full text of the article. Second, the links count as votes in Google’s PageRank algorithm, which increases the overall search engine profile of the newspaper. Some Righthaven critics do not understand why newspapers would want to discourage or eliminate these value transfers.

* Many defendants are small-time non-commercial bloggers or non-profit organizations, most of whom simply can’t afford to litigate. Unfortunately, in the blogger and non-profit communities, many people (often mistakenly) assume fair use permits them to freely republish any articles they think would be interesting to their audiences. Thus, Righthaven’s lawsuits blindside these republishers, as they (perhaps mistakenly) thought they were following appropriate protocols.

* Righthaven acquires an interest in the article’s copyright only after it has identified an infringement and wants to bring a lawsuit. Some defendants (and commentators) have accused Righthaven of champerty and barratry.

* Righthaven has sued defendants who have quoted only a portion of the original newspaper article. For example, in today’s case, the defendant quoted the first 8 sentences from a 30 sentence article.

* Righthaven has sued numerous web operators for articles reposted by users. As discussed above, Righthaven never sends 512(c)(3) takedown notices, but Righthaven apparently only sues defendants who haven’t made the required 512-related filing with the Copyright Office. Even so, Righthaven’s pleadings rarely distinguish between user postings and operator postings, effectively assuming the operator will be automatically culpable for user postings.

* The Copyright Act provides zero support for Righthaven’s demand to get the defendant’s domain name. Instead, this demand looks like a pressure tactic to increase defendants’ incentives to settle the case (i.e., settle up over this one article or we will permanently take your entire site offline).

* Some Righthaven defendants have been helpful to the participating newspapers. For example, Righthaven sued a source that provided helpful material to the Las Vegas Review-Journal; the source then republished the resulting article on its website. Being a source to a story doesn’t give the source automatic rights to republish the story, but a lawsuit isn’t a great way for the newspaper to say thanks for the help, either.

* Righthaven sued Sharron Angle, a Republican US Senate candidate in Nevada, for republishing a Las Vegas Review-Journal story on her campaign website. Suing major political candidates isn’t a great way to curry favor with important media subjects. Even more bizarrely, the Las Vegas Review-Journal endorsed Angle’s Senate candidacy [nofollowed link] over incumbent Harry Reid–while its infringement lawsuit against Angle was still pending!

Put aside all of these controversies for a moment. The main question on my mind is whether Righthaven can be a profitable business and, if so, whether Righthaven can generate new incremental revenues for financially beleaguered newspapers.

For Righthaven defendants, it’s almost always cheaper to settle than fight. Righthaven has been willing to accept settlements in the few thousand dollar range, and it’s effectively impossible to defend a copyright case for less than that. So from a defendant’s standpoint, Righthaven’s settlement offer is a better financial deal than fighting the suit. This is why so many people have analogized Righthaven to “patent trolls.”

Because it’s effectively running a settlement mill, Righthaven needs quick and easy settlement. Otherwise, Righthaven will incur investigation, filing, serving and litigation costs that grow with each step in the process; and after the revenue split with the newspapers, the remaining gross margin per suit will be pretty small if Righthaven takes relatively small dollar value settlements. Of course, Righthaven could get its requested $75k-$150k in damages and attorneys fees from a successful court battle, but its costs to get those damages will be significant–especially if it doesn’t get the attorneys fees–and small-time blogger or non-profit organization defendants may not have the cash to satisfy the judgment. In reality, I don’t expect Righthaven to get big payoffs in the cases it successfully fights to the end. It’s more likely judges will award Righthaven only the statutory damages minimums and no fees, which actually would be a big loss for Righthaven (i.e., to spend the time and money to litigate a case through damages only to get less than its typical initial settlement offer).

What clearly won’t maximize Righthaven’s profits are lengthy court fights that lead to Righthaven losses–especially if the defendants get their attorneys fees under the 17 USC 505 fee-shifting provisions. If lots of defendants fight back against Righthaven and some of them win, and some of those getting their attorneys fees, it will be hard to get enough cheap-and-easy settlements to make a decent profit.

As it turns out, lots of defendants have made the economically irrational decision to reject Righthaven’s settlement offer and fight in court. These defenses are producing a trickle of early rulings. For example, in the Klerks ruling, the court overturned a default judgment on the basis that the defendant may have meritorious defenses such as fair use and implied licenses.

Yesterday, we got the most important Righthaven ruling yet, this time in the Realty One Group case. The case involves a real estate broker’s republication of 8 sentences from a 30 sentence Las Vegas Review-Journal article on the broker’s blog, www.michaeljnelson.featuredblog.com (now devoid of content). The court granted the blogger’s fair use defense…on a motion to dismiss! The court notes the blogger quoted a relatively small percentage of the source article and, more to the point, says the blogger’s “use of the copyrighted material is likely to have little to no effect on the market for the copyrighted news article.”

Successful fair use defenses on a motion to dismiss are exceptionally rare. It is hard (impossible?) to resolve fair use questions without relying upon disputed facts–a no-no on a motion to dismiss. Thus, it appears the court cut some procedural corners, and I could see an appeals court requiring the district court to try again. So as exciting as this result is, it may be vulnerable to an appeal if Righthaven pursued it. However, according to the Las Vegas Sun, “Righthaven CEO Steven Gibson, a Las Vegas attorney, on Wednesday said Righthaven likely won’t appeal the Nelson ruling since it reached a confidential settlement with Nelson prior to the ruling being filed.”

Despite the procedural limitations of the ruling, the opinion nevertheless provides some useful insights into the viability of Righthaven’s tactics. The case shows that judges will pay close attention to fair use defenses, especially when it’s simply not credible that the republications had any detrimental effect on the newspapers. The case also shows that judges will tolerate partial quotations of articles. Righthaven has repeatedly claimed that almost all of its cases involve 100% verbatim copying of the entire article, and this case shows that any exceptions to Righthaven’s stated approach will fare less well in court. Most obviously, the ruling shows that the courts would rather clear low-merit cases off their dockets quickly, even if they have to cut some procedural corners to do so. Indeed, by kiboshing Righthaven cases early, the court avoids wasting time and money on bogus claims. For these reasons, even if an appeals court reverses the Realty One ruling on procedural grounds, it’s clear that Righthaven has zero chance of winning this case.

If the parties hadn’t settled, this ruling would be an excellent candidate for a 505 fee shift to the defendant. Any fee shifts could seriously erode Righthaven’s margins. That’s why I continue to wonder if Righthaven will ever find a profitable niche.

Even if Righthaven has a profitable business, it remains unclear if the participating newspapers get a good economic deal by participating in Righthaven’s program. In the copyright world, almost every infringer is a potential customer, so newspapers might get better results by trying to work with republishers rather than blasting them.

Further, it’s an empirically unresolved question if the traffic-generation-plus-pagerank-boost payoffs from unauthorized republication more economically valuable than any net proceeds Righthaven might generate from its enforcement actions. For example, in response to the in terroram campaign, people might be scared to talk about the newspaper’s articles online.

Indeed, we’re seeing this already with respect to links that don’t involve any republications. The well-regarded law firm of Sheppard Mullin blogged an advisory that “blogs should be careful not to hyperlink to newspaper articles or other material that may be copyrighted” (they have since amended their post to water down their admonition), and a National Law Journal article (unfortunately behind a paywall) wrote that “Although providing a direct link to an online article is generally considered less risky than copying the original article in its entirety, linking may not fully insulate bloggers and other online users from copyright infringement claims.” These fears over linking are unwarranted, but the muddled messages from Righthaven’s in terroram campaign could effectively isolate Righthaven-participating newspapers from the rest of the information ecosystem. Obscurity may be a far worse fate for newspapers than unauthorized republication by the kind of defendants that Righthaven is suing. FWIW, unless there is no other way to communicate my message, I will not link to any newspaper that I know is working with Righthaven.

Finally, Righthaven’s lawsuits against the newspapers’ friends (such as its sources or major political figures) seem counterproductive. In desperate times like now, newspapers need all the friends they can get. Lawsuits against friends are a pretty sure way to convert them to enemies. FWIW, I will not act as a source for any newspaper that I know is participating in the Righthaven program, either.